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MP attacks FSCS fees as unfair burden on building societies

Ann Cryer, Labour MP for Keighley, has slammed the Financial Services Compensation Scheme’s fees on-slaught on building societies.

Her comments were made at a Westminster Hall debate last week following a parliamentary early day motion on society levies.

Cryer wants to cut the fees societies are forced to pay the FSCS to fund the failure of banks. She argues that societies’ share of the burden is disproportionate.

Cryer says: “This FSCS-driven onslaught comes at a particularly bad time when you consider the bigger picture.”

She says that in many ways societies are seen as an antidote to the banking excesses of the recent past and represent a haven of sanity which should be nurtured.

She adds that despite the Treasury Select Committee confirming that it will be conducting a review into FSCS levies, no details of such a process have been released.

Ian Pearson MP, economic secretary to the Treasury, says he sympathises with societies’ plight and will ensure the Financial Services Authority looks at Cryer’s case.

He adds: “Rules on levies are a matter for the FSA. As a gov-ernment, we have always been clear that the costs of the scheme should be met by the financial services industry.

“It makes sense that each sector should consume its own smoke. Societies are deposit-taking organisations and it would seem unfair that parts of the industry more remote from deposit-takers should pick up the bill before they do.”

He adds that if there was a system whereby societies did not contribute towards the cost of bank defaults, banks would also not be expected to contribute towards the protection of societies in future.

For the society sector, the FSCS bill will be up to 200m per year for the next three years and for 2009/10 it will be around 130m – equivalent to about 9% of the sector’s total pre-tax profit for the 2007/08 financial year.

The Building Societies Association has vowed to continue its battle against the fees and says many members are starting to get involved in the campaign.

A BSA spokeswoman says: “We are going to continue our efforts on the question of FSCS fees. Many societies are seeing their profits slashed due to this levy and are beginning to get their members involved.”

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